Sarine Technologies

[Wildreamz]

Yes. it requires a machine to differentiate. From Wiki https://en.wikipedia.org/wiki/Synthetic_...#Gemstones:

Gem-quality diamonds grown in a lab can be chemically, physically and optically identical to naturally occurring ones. The mined diamond industry has undertaken legal, marketing and distribution countermeasures to protect its market from the emerging presence of synthetic diamonds.[103][104] Synthetic diamonds can be distinguished by spectroscopy in the infrared, ultraviolet, or X-ray wavelengths. The DiamondView tester from De Beers uses UV fluorescence to detect trace impurities of nitrogen, nickel or other metals in HPHT or CVD diamonds.[105]

At least one maker of laboratory-grown diamonds has made public statements about being "committed to disclosure" of the nature of its diamonds, and laser-inscribes serial numbers on all of its gemstones.[97] The company web site shows an example of the lettering of one of its laser inscriptions, which includes both the words "Gemesis created" and the serial number prefix "LG" (laboratory grown).[106]

Women too, can't differentiate it unless they have it lab-tested. That said, diamond is a pure status symbol. There is no use trying to pretend your multicarat diamond is natural, people that care about this already know whether you could afford it (based on some presupposition of your economic status).

Newer generations apparently care less for the "all natural" tag.

[holymage]

Looks like the CEO of De Beers is catching onto what some investors still ain't aware of - the changing consumer habit. 
It is telling when a CEO drastically changes its business strategy since the past century.

Sarine seems to be able to expand their product range in this shrinking market. The managements seems capable, no doubt about that. 
But how much more market share can Sarine capture in this shrinking pie. Given the high P/E, it is definitely not worth the risk, just because Sarine is trading at a 6 year low.

Good luck to those vested.

De Beers to Sell Diamonds Made in a Lab
May 29, 2018
https://www.bloomberg.com/news/articles/...e-diamonds

Some excerpts from the article:

'“Lightbox will transform the lab-grown diamond sector by offering consumers a lab-grown product they have told us they want but aren’t getting: affordable fashion jewelry that may not be forever, but is perfect for right now,” said Bruce Cleaver, chief executive officer of De Beers.'

'There’s been increasing concern in the industry that expensive diamonds aren’t appealing to millennial consumers, who are often more likely to spend on high-priced electronics or vacations.'

The illicit competition may be temporary, but I think a larger factor that hasn't garner sufficient attention is the possibility of structural change in consumer habit. Research on the industry is definitely lacking. I read somewhere that China is the 2nd largest market for diamond (US being the first), and many articles reporting that Chinese millennials has changed from "material wants" to "experiences" like travelling etc. Even within the "material wants" categories, there are emerging competitors vying for the consumer's wallet, like... the technology gadgets. Would you rather spend on the latest smartphone/tablets, or a piece of diamond?

Sarine's latest Q3 2017 quarterly report stated that there is higher than normal surplus inventories of polished diamonds. This problem started in 2015 and persist till 2017, despite several premium consumer products companies reporting record revenue and profits (Kweichow Moutai, Pola Orbis, Apple etc). Could it be that the declining demand for diamonds is insufficient to deplete the existing inventory of diamonds? If that is the case, is it justified to classify Sarine as a growth stock, given its market leader position in a declining industry? More research is definitely needed.

If this structural change is real and demand for diamond is expected to dwindle in the years to come; while diamond is no buggy whip, Sarine definitely do not deserve a P/E meant for a growth stock. 

Good luck to those vested.

[Clement]

Looks like the CEO of De Beers is catching onto what some investors still ain't aware of - the changing consumer habit. 
It is telling when a CEO drastically changes its business strategy since the past century.

Sarine seems to be able to expand their product range in this shrinking market. The managements seems capable, no doubt about that. 
But how much more market share can Sarine capture in this shrinking pie. Given the high P/E, it is definitely not worth the risk, just because Sarine is trading at a 6 year low.

Good luck to those vested.

De Beers to Sell Diamonds Made in a Lab
May 29, 2018
https://www.bloomberg.com/news/articles/...e-diamonds

Some excerpts from the article:

'“Lightbox will transform the lab-grown diamond sector by offering consumers a lab-grown product they have told us they want but aren’t getting: affordable fashion jewelry that may not be forever, but is perfect for right now,” said Bruce Cleaver, chief executive officer of De Beers.'

'There’s been increasing concern in the industry that expensive diamonds aren’t appealing to millennial consumers, who are often more likely to spend on high-priced electronics or vacations.'

The illicit competition may be temporary, but I think a larger factor that hasn't garner sufficient attention is the possibility of structural change in consumer habit. Research on the industry is definitely lacking. I read somewhere that China is the 2nd largest market for diamond (US being the first), and many articles reporting that Chinese millennials has changed from "material wants" to "experiences" like travelling etc. Even within the "material wants" categories, there are emerging competitors vying for the consumer's wallet, like... the technology gadgets. Would you rather spend on the latest smartphone/tablets, or a piece of diamond?

Sarine's latest Q3 2017 quarterly report stated that there is higher than normal surplus inventories of polished diamonds. This problem started in 2015 and persist till 2017, despite several premium consumer products companies reporting record revenue and profits (Kweichow Moutai, Pola Orbis, Apple etc). Could it be that the declining demand for diamonds is insufficient to deplete the existing inventory of diamonds? If that is the case, is it justified to classify Sarine as a growth stock, given its market leader position in a declining industry? More research is definitely needed.

If this structural change is real and demand for diamond is expected to dwindle in the years to come; while diamond is no buggy whip, Sarine definitely do not deserve a P/E meant for a growth stock. 

Good luck to those vested.

Correct me if I am wrong, but even lab grown rough diamonds require cutting and polishing before being set into jewelry.

Given that Sarine's business is still primarily involved in cutting and manufacturing part of the value chain, I don't think we can conclude that the market for its products and services is shrinking.

[bardsmanship]

Looks like the CEO of De Beers is catching onto what some investors still ain't aware of - the changing consumer habit. 
It is telling when a CEO drastically changes its business strategy since the past century.

Sarine seems to be able to expand their product range in this shrinking market. The managements seems capable, no doubt about that. 
But how much more market share can Sarine capture in this shrinking pie. Given the high P/E, it is definitely not worth the risk, just because Sarine is trading at a 6 year low.

Good luck to those vested.

My takeaway from this piece of news is quite different.

De Beers isn't pivoting from natural diamonds to lab-grown diamonds. Rather, what they're trying to do is further differentiate natural diamonds from lab-grown ones.

Take a look at the price differential between these 2 types of diamonds just a few months ago. A 1-carat lab-created diamond goes for $4000, about 30% cheaper than a 1-carat natural diamond which costs $6000. 
[Image: 1.png]
(source: http://www.paulzimnisky.com/the-price-of...es-to-fall)

Now consider how much De Beers is going to sell a 1-carat diamond they grew in their lab: $800. That is a whopping 87% discount to the natural diamond! And an 80% discount to what similar lab created diamonds are currently being sold for!

If De Beers meant to make lab-grown diamonds a much bigger part of their business, why on earth would they drastically limit their own potential profits in this way? If they wanted to undercut the other lab-diamond makers, selling a 1-carat lab-grown diamond for say, $3000 (50% discount to natural, 25% discount vs competitors) would suffice. 

So, what they actually want to accomplish is to minimize the threat of lab-grown diamonds to their core business, by emphasizing the differences between the two, including price. This makes sense because traditionally diamonds are considered a Veblen good (demand increases as price increases). 

It also explains why De Beers, despite having set up its own diamond grading lab not so long ago, is against grading their own lab-grown diamonds. In the words of the CEO: “We’re not grading our lab-grown diamonds because we don’t think they deserve to be graded. They’re all the same.” 
(source: https://www.bloomberg.com/news/articles/...e-diamonds)

Now the key question is, will this strategy work?

[dzwm87]

Will recommend reading "The Rise and Fall of Diamonds" by Edward Jay Epstein. You will better understand the entire industry.

The Oppenheimer family has long ago ceded control of De Beers. When you long the diamond industry, you need to be certain if you are long the De Beers brand or the Oppenheimer's shrewdness.

History aside, even if the industry is fine, Sarine faces a lack of market growth. I don't buy their expansion into the retail market. I recall their unit economics is much lower.

Sent from my Pixel 2 using Tapatalk

[specuvestor]

Looks like the CEO of De Beers is catching onto what some investors still ain't aware of - the changing consumer habit. 
It is telling when a CEO drastically changes its business strategy since the past century.

Sarine seems to be able to expand their product range in this shrinking market. The managements seems capable, no doubt about that. 
But how much more market share can Sarine capture in this shrinking pie. Given the high P/E, it is definitely not worth the risk, just because Sarine is trading at a 6 year low.

Good luck to those vested.

My takeaway from this piece of news is quite different.

De Beers isn't pivoting from natural diamonds to lab-grown diamonds. Rather, what they're trying to do is further differentiate natural diamonds from lab-grown ones.

Take a look at the price differential between these 2 types of diamonds just a few months ago. A 1-carat lab-created diamond goes for $4000, about 30% cheaper than a 1-carat natural diamond which costs $6000. 
[Image: 1.png]
(source: http://www.paulzimnisky.com/the-price-of...es-to-fall)

Now consider how much De Beers is going to sell a 1-carat diamond they grew in their lab: $800. That is a whopping 87% discount to the natural diamond! And an 80% discount to what similar lab created diamonds are currently being sold for!

If De Beers meant to make lab-grown diamonds a much bigger part of their business, why on earth would they drastically limit their own potential profits in this way? If they wanted to undercut the other lab-diamond makers, selling a 1-carat lab-grown diamond for say, $3000 (50% discount to natural, 25% discount vs competitors) would suffice. 

So, what they actually want to accomplish is to minimize the threat of lab-grown diamonds to their core business, by emphasizing the differences between the two, including price. This makes sense because traditionally diamonds are considered a Veblen good (demand increases as price increases). 

It also explains why De Beers, despite having set up its own diamond grading lab not so long ago, is against grading their own lab-grown diamonds. In the words of the CEO: “We’re not grading our lab-grown diamonds because we don’t think they deserve to be graded. They’re all the same.” 
(source: https://www.bloomberg.com/news/articles/...e-diamonds)

Now the key question is, will this strategy work?

I understand what they are doing but I dont understand the logic. Imagine Porsche respond to EV disruptive Tech by producing a Porsche EV at Picanto price.

Segmentation at its worst. At least Merc came out with a viable 180 segment.

[bardsmanship]

History aside, even if the industry is fine, Sarine faces a lack of market growth. I don't buy their expansion into the retail market. I recall their unit economics is much lower.

Care to expand on this?

[weijian]

I understand what they are doing but I dont understand the logic. Imagine Porsche respond to EV disruptive Tech by producing a Porsche EV at Picanto price.

Segmentation at its worst. At least Merc came out with a viable 180 segment.

They seems to be selling under another brand called "Lightbox". I believe the marketing and sales strategy will be totally different from their flagship De Beers and Lightbox will not be associated with De Beers at all. It's like Toyota selling the upscale Lexus, or SIA differentiating itself with Scoot.

With so many business schools' lessons learnt (Eg. The Cadillac Cimarron sold as an economic car when all Cadillac owners only want to be seen as arrogant and extravagant on the road, of course eventually flopped), they should do better bah?

[specuvestor]

They seems to be selling under another brand called "Lightbox". I believe the marketing and sales strategy will be totally different from their flagship De Beers and Lightbox will not be associated with De Beers at all. It's like Toyota selling the upscale Lexus, or SIA differentiating itself with Scoot.

This is a vanity product. They will know where it comes from

[dzwm87]

Care to expand on this?

Can't remember the details but their marginal growth is coming from smaller stones. New product lines are much cheaper and it's akin to having to sell more machines in order to achieve the same growth levels. Same for the retail grading.

Core products are either at 70 or 80% of market, which means they are grow only by market growth. Market share wins are going to be minimal now.

Some think product infringement rights is a testament to their R&D competency but how long does their IP last? Once that expires, you have another set of competition coming in.